Adversary Threat Question

[gello]

Hello all, I am new to this forum and have recently filed Chapter 7. Here is my situation. I did all that I could to pay my bills. And in January, I transferred some balances to a card with lower rates. After that, I decided that we could not pay our bills and survive. I met with a lawyer and it was determined that the best course of action was to file Ch.7. Well, we just had our 341 meeting and I recently got a letter from Chase regarding the balance transfer. I told my lawyer about the BT at our initial meeting and he said that it was not a problem. We did not buy anything, I just did it online and at the time I had not even considered BK. Now, I get this threat from Chase for an adversary proceeding offering me repayment terms. It states "it appears that this is a classic case of your client running up a CC prior to filing for BK." While I did make the transfer, I did not increase my debt. My lawyer never said anything about the 70 days. So, basically, am I screwed? Thanks in advance for any advice.

[justbroke]

Well, you may be in a bad position. You are technically and presumed to be insolvent 90 days within filing. You would have to prove otherwise. The bank, Chase, has a pretty good case. Strange though, some Trustees have gone after it as a preference since you paid off another creditor over $600. So, the Trustee may go after Chase on his/her own accord. Should get interesting if that happens, and Chase is probably hedging the bet to not be standing there looking stupid when the music stops.

(Chase is after you because a balance transfer is the same as a "cash advance" and those are presumed to be non-dischargeable. I'm sure the Chase letter mentioned 11 USC 523.)

There is some caselaw, especially in the 6th Circuit, that indicates that a balance transfer is "not" new debt. Therefore the debtor should be able to beat a non-dischargeability complaint. However, those cases are fact specific. If Chase sent you a balance transfer check and said "hey look... 0% if you do this now", and you did so to save money, that could help you win the adversary proceeding (AP) / complaint. If you just said... "hey self, why not move Card X to Card Y" and the only reason was to free up credit... this could be an "eve of bankruptcy" issue.

You and your attorney need to sit down and think about this. The majority of the caselaw is that this would be a non-dischargeable debt unless you have "special" circumstances like the one listed above.

[gello]

Well, you may be in a bad position. You are technically and presumed to be insolvent 90 days within filing. You would have to prove otherwise. The bank, Chase, has a pretty good case. Strange though, some Trustees have gone after it as a preference since you paid off another creditor over $600. So, the Trustee may go after Chase on his/her own accord. Should get interesting if that happens, and Chase is probably hedging the bet to not be standing there looking stupid when the music stops.

(Chase is after you because a balance transfer is the same as a "cash advance" and those are presumed to be non-dischargeable. I'm sure the Chase letter mentioned 11 USC 523.)

There is some caselaw, especially in the 6th Circuit, that indicates that a balance transfer is "not" new debt. Therefore the debtor should be able to beat a non-dischargeability complaint. However, those cases are fact specific. If Chase sent you a balance transfer check and said "hey look... 0% if you do this now", and you did so to save money, that could help you win the adversary proceeding (AP) / complaint. If you just said... "hey self, why not move Card X to Card Y" and the only reason was to free up credit... this could be an "eve of bankruptcy" issue.

You and your attorney need to sit down and think about this. The majority of the caselaw is that this would be a non-dischargeable debt unless you have "special" circumstances like the one listed above.

I didn't do it to free up credit, I did to try and stay out of bankruptcy. Which obviously did not work. Anyway, I am pretty POd that my lawyer did not say anything when I mentioned this. Chase's lawyer offered me terms for the amount owed, but it is the full amount, which is obviously I cannot pay.

[gello]

And to add, I had every intention of paying the debt. My wife and I are both employed, but we just got overwhelmed. We have never missed a payment, never been late, etc...So not sure how they can say we are insolvent.

[Dst1]

You are technically and presumed to be insolvent 90 days within filing.

That's news to me. Would you care to tell me why you think that.

(Chase is after you because a balance transfer is the same as a "cash advance" and those are presumed to be non-dischargeable. I'm sure the Chase letter mentioned 11 USC 523.)

But as you point out, this is a rebuttable presumption. I would hope his attorney would know the attitude in his district and know whether this would fly or not given his specific factual circumstances. Based upon the information provided here, it seems like he as an easy case to rebut the presumption.

[Mensa1]

I told my lawyer about the BT at our initial meeting and he said that it was not a problem. We did not buy anything, I just did it online and at the time I had not even considered BK.

Another classic case of an Atty who didn't think this thru very well, IMO. How in the world can the Atty make that statement? At the very least he should have encouraged you to wait until the BT was seasoned, and even then you might still have a challenge. With the time frame since the transfer
you are merely making it easy on Chase to file the AP. Can't blame them for that move, anyone would do the same.

I am familiar with the thought that BT is not new debt. Lets hope your Atty is well read on such case law. Wish you a reasonable resolution.

[justbroke]

You are technically and presumed to be insolvent 90 days within filing.

That's news to me. Would you care to tell me why you think that.

There are multiple sections of the Bankruptcy Code where it is spelled out. When dealing with preferences, which is in 11 USC 547, the code specifically mentions in (f) that (with regard to preferences), "the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition."

But as you point out, this is a rebuttable presumption.

Insolvency is only rebuttable if you can prove that you weren't, actually, insolvent. If gello can show that they had money at the time and were only rearranging debt, to take advantage of the 0% interest (for example), I think this can be shown.

I'm sorry that the attorney put gello into this position, but Chase is probably thinking easy money. This is a double-whammy. The Trustee could seek to avoid the payment that Chase made to the other creditor by recovering the preferential payment from that other creditor. But "gello" you need not concern yourself with the preference issues.

[albacore44]

its really to bad you did not find this forum before you did that. you say you did that in january ?? and this is March ?? holy shizz.

Why the rush to file ?? I think you got bad advise from an attorney who was in a rush to take your money, sorry to say. many of us here did balance transfers. but in order to get past the presumption of abuse, you should have waited. i waited a whole year from the time i made my last CC payment, for just that reason.

best of luck to you. your going to need it.

[MrsDixon]

I filed in 10/2008 and had just completed BT's a month or two earlier. A few lawyers didn't want to touch my case until the BT's had seasoned but one lawyer that I talked to called me a few days later and said "something just came down the pipes about BT's, I can file it". He filed it and everything was fine. Has something changed since 2008?

[Dst1]

There are multiple sections of the Bankruptcy Code where it is spelled out. When dealing with preferences, which is in 11 USC 547, the code specifically mentions in (f) that (with regard to preferences), "the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition."

Yes but the exception doesn't swallow the rule. While it's true that there are specific portions of the code where there is such a presumption, there is no overarching rule that "90 days=insolvent". After all, if there were such a rule the rebuttable presumption would no longer be rebuttable.

[BKFOURAB]

I had a similar situation in my first BK, but the laws have changed. I had several creditors scream that I was abusing the law(s). None of which were upheld by the trustee. It was Chase MC who brought the first adversarial against me. I had to go through interrogatories, and the credit union said everything was cross-collateralized, blah, blah, blah. But the trustee saw it my way and discharged it all. Talk to your attorney. He/she should already have a copy of the paperwork the CC sent to you.

[justbroke]

Yes but the exception doesn't swallow the rule. While it's true that there are specific portions of the code where there is such a presumption, there is no overarching rule that "90 days=insolvent". After all, if there were such a rule the rebuttable presumption would no longer be rebuttable.

Didn't mean to indicate that it did from a "purely" wording standpoint, and I think I used the words "is presumed insolvent" and not "is insolvent". Perhaps I'm not saying it right, so I apologize.

Because the original poster's question is specifically about a charge made within 90 days, the "presumption" is in play (11 USC 523). Also, the "presumption" comes into play from a preference point (11 USC 547) should the Trustee choose to pursue that avenue to avoid the transfer on behalf of the other unsecured creditors.

So my answer was specific to preferences and to a cash advance (balance transfer) that occurred during the period shown in 523 and 547 as presumed insolvency. Or am I missing something here?

[keptdigging]

I am going to have similar issues... big time. I am so thankful that I found this site BEFORE finding an attorney. I knew all about the 90 day presumption, but this site is where I learned what creditors really do. I'm actually in the process of putting together a "dirty laundry list." If an attorney tells me "no problem," I'm likely to just move on. I'm looking for the one who can quote odds and experience and suggest strategies.

The irony is that the sins I committed, I committed trying to be a good boy and pay all my bills on time. If I was really planning to go bankrupt, I would have done a lot more research and done a much better job! But such is life when you've fallen into the rabbit hole. (Along with: more income is bad, home going up in value is bad, etc. etc.)

What I've also learned: I wish I was in the Inland Empire (I'm in San Diego instead) and could use Albacore44's attorney.

[keptdigging]

Okay, as to Gello's case....

Maybe the law is on your side in your district and your attorney knows it. Note that at this point, all Chase has had to do is send out a letter. They haven't had to commit any funds to litigation nor risk having to cover your attorney costs.

Still amazing that he'd let that go through when you're not even outside of the 70 day window (and thus YOU have the burden of proof, not the creditor.)

====

If I was a little bit (or a lot bit!) younger and willing to take out student loans (if there's one thing I'm thankful for it is that I don't have any of those... those are the chains of a slave)... I'd go to law school just to get out and practice consumer bankruptcy.

[TurnThePage]

If case law matches the same circuit Debtor is in, it is binding on the Bankruptcy Court Judge; otherwise it is merely "persuasive .." Hopefully gello's attorney has a good defense to this BT; many courts have held that BT's are not necessarily "fraudulent," but it varies ... I am surprised, too, that the attorney did not catch this ... But I believe Chase is a creditor that will more than likely accept a settlement in a counter offer though ... Anyway, that's just my 2 cents.